BIR Ruling

May 15, 1969 Mr. Procopio C. Reyes President-Manager Pasay City Development Bank 2462 Taft Avenue Extension Pasay City S i r : This is in reply to your letter dated April 24, 1969 requesting information on a query stated as follows: liblex "With due respect to their position that all future applications of this Bank either for re-discounting or additional DBP subscription, and all releases therefrom be accompanied by evidence of corporate income tax for the period from July 1, 1968 to December 31, 1968, irrespective of whether our bank is operating on accounting period of calendar or fiscal year, we believe that our income tax return for the fiscal year ending June 30, 1969 is not yet due until October 15, 1969. The opinion of the Department of Development and Rural Banks, was apparently based on your newspaper announcements that corporations formerly tax exempt are now taxable unless exempted under Section 24(c)(1) and 27 of the National Internal Revenue Code, as amended, and should file their income tax return for the period July 1st to December 31st; 1968, whether operating under calendar or fiscal period. In view of the foregoing, may we request for your opinion as to whether we are required, under Republic Act No. 5431, to file a separate income tax return for the period July 1st to December 31st, 1968, aside from our regular income tax return for the fiscal year 1968-1969, ending June 30, 1969, as provided for in our corporate by-laws." For income tax purposes, income and deductions must be reported in the proper period. Generally, returns required to be filed should report income received or earned by a taxpayers, individual or corporate, during an accounting period of twelve (12) consecutive months. The twelve-month period may start with January (calendar year) or any other month (fiscal year) provided it comprises twelve consecutive months. However, as an exception to the aforesaid general rule, there are some instances under Philippine income tax laws, when income tax returns may be filed to cover an accounting period of less than twelve months, e.g., when taxpayer's accounting period is changed with the permission of the Commissioner of Internal Revenue; when the taxpayer dies and a return is made covering the period from the beginning of the decedent's taxable year to the date of his death; creation and liquidation of a trust; creation and liquidation of corporations; and when an executor or administrator makes a return for the estate of a deceased taxpayer to cover income received from the date of the taxpayer's death to the end of the estate's first taxable year. In view of the foregoing, and considering that not one of the aforementioned instances exists under your representation, this Office believes and so holds that your bank should file only one return on or before October 15, 1969 for income received or earned during the fiscal period starting July 1, 1968 and ending June 30, 1969, and the tax thereon computed at the increased rates prescribed by Section 24 of the Tax Code as amended by Republic Act No. 5431. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue